Minimize employee theft by letting your staff know that you’re paying attention to the details.
We have a lot to learn from George Clooney’s life of crime.
As you may remember, Mr. Clooney starred in the remake of “Ocean’s Eleven” and several sequels, as well as not appearing in “Ocean’s 8” (the one with Sandra Bullock). In these movies, Danny Ocean (Mr. Clooney) is a criminal mastermind who is always coming up with elaborate and complicated schemes in order to steal items from someone else.
Now, let’s put aside, for the moment, that Danny Ocean supposedly has a heart of gold and would only rob those who were deserving of it. What I want to concentrate on is that, in the movies, you always thought he had been caught, until he came up with a twist to get away with it. This is not dissimilar to what happens in our stores when we are dealing with in-store theft. I’ll explain more about that in a moment.
According to the 2020 NACS State of the Industry report, store “shrink” (which includes theft and breakage) averages about $12,700 per store per year. That is money that would go straight to the bottom line — if it stayed in the store.
The reality is that no matter how good your customer service is, how effective your marketing programs are, or how pristine your store looks, there will be product that is either being consumed in the store or walking out of the store without being paid for.
The 2018 National Retail Security Survey published by the National Retail Federation stated that 33.2 percent of merchandise shrink is related to employee theft. (The other reasons are shoplifting, 35.7 percent; administrative/paperwork errors, 18.8 percent; vendor fraud, 5.8 percent; and unknown, 6.6 percent).
How do we handle this, and what actions can we take?
This is where I come back to Mr. Ocean and his schemes. In the movies, every time the authorities thought they had come up with a plan to catch him, he introduced a new element to keep them off-balance. Basically, the thieves are always one step ahead of the good guys. This is true in your store as well.
So, let’s address employee theft first (and let’s be clear — this is stealing). We have tried a lot of different programs over the years to control employee theft. To clarify our definition, employee theft is anything that is removed from the store that’s not accounted for. That means it was either consumed and not paid for, or it was not written off as bad merchandise. Examples of this can range from someone putting a pack of cigarettes in their pocket and walking out, to eating food and not paying for it, to under-ringing a sale.
To be honest, we are never going to completely stop employee theft. All we can do is try to minimize it. The best way to do this is to let your store team know that you are keeping track of what is happening in the store. We try to do this in the following ways:
Keep all your store paperwork up-to-date and in order. If you have a good system of tracking sales, purchases, bank deposits, credit-card receipts and bad merchandise, you will send a message to your team that you’re paying attention to the details.
It will be up to each shift leader and the store manager to make sure everything is accounted for and that it all balances. If the staff knows you’re taking the numbers seriously, they will be less likely to create a situation that will show up in the paperwork.
Unfortunately, that also means they will work harder to cover up anything that is taking place in the store. Therefore, you need other tools to keep track of what’s happening with your store merchandise.
We do a store inventory count every 30 days to see what our monthly inventory shrink is. We use an outside auditing company to perform this task to make sure we are getting an unbiased number. The store managers are held responsible for the inventory results and if there is a significant problem, we take corrective actions with the staff.
We also do cigarette counts either daily or by shift, depending upon our levels of sales or problems at the store. Keeping count of the inventory, as well as keeping excess tobacco inventory tightly locked up, helps us control our most valuable products.
The advantage of doing a count by shift is that we can start to pinpoint when problems are happening as soon as possible, and start taking corrective actions. It is unlikely that one shift lead will cover for another one or, at least, be able to do it consistently over time.
We also use CCTV and let our employees, and customers, know they are being recorded. We believe that having video is a deterrent — people are less likely to steal if they think they are being watched. But it is not a complete solution. All you have to do is watch some of the shoplifting videos on YouTube to see what happens in the store — even when people know there are cameras in the store and the owners are posting the videos on the internet.
Frankly, we don’t use video to discover theft because we do not find it cost- or time-effective to watch hundreds of hours of video per store in the hopes of catching someone stealing something. Instead, we use video to investigate problems at the store once we become aware that we have a problem through our use of the other methods.
In all cases, we try to discover the problem as quickly as possible, investigate thoroughly to gather all the information we can, and then work to remedy the problem as quickly as possible either through counseling, repayment or termination. It’s important to not let employee theft go on any longer than necessary because all it is doing is costing you money.
Remember, just like Danny Ocean, your staff is always going to be one step ahead of you. Always keep your eyes open and look out for new and inventive ways people can steal from you. Listen to stories you hear from others in the industry to get insight about new tricks and strategies.
Watch out for any pattern of unusual things. For instance, pennies being kept on the register as counters (to keep track of how many sales weren’t rung up), regular “no sale” transactions (sales where the cash went into the pocket and not the POS), or staff refusing to work different shifts (because it will expose the fact that they have been under-reporting sales).
I don’t mean for this to sound overly paranoid, but a good dose of realism is always helpful. Other tricks to look out for are “sweetheart deals,” where friends and family get an unofficial discount, merchandise that is written off as damaged when it’s taken out of the store, or “inventory padding” when items aren’t checked in properly and are put on the shelf to replace product that was stolen.
Unfortunately, the list goes on and on. That is why it’s so important to find good people, train them thoroughly, pay a decent wage, and instill in them a sense of pride in their store and your company by treating them well and showing your appreciation.
The best defense against a dishonest employee is an honest one.
In my next column, I’ll talk about customer theft. Be sure to come back for the sequel!
Related News: The Art of the Steal – Part Two
Roy Strasburger is the CEO of StrasGlobal. Have a question or a comment? You can contact him at firstname.lastname@example.org.